Featured Book

Flipping and Estimating Bundle

You don't need to be a contractor to flip houses, but you do need to know the fundamentals of budgeting and pricing your renovation.
This book gives you the tools needed to produce the income you desire on your first—or next—flip!

How to determine appropriate amount of damage to charge on move outs ?

Investor and Real Estate Agent from Maize, Kansas

posted over 4 years ago

I'm looking for the most effective strategy on determine renter costs owed upon move out :

On top of that I would like advice on my current move out situation :

Renter put his 30 day notice in Sep 1st so we started showings right away. The rental is very nice (built in 07) and had new appliances put in at the start of this past lease. The house doesn't have much damage but is pretty filthy. The appliances look 5 years old in 1 years time ; are scratched up ; carpets were not in great shape to start but are very dirty / dis colored now. The renter worked for a construction crew and obviously brought his job home with him ; hence the filth. I would like to get it deep cleaned right away to help with showings but he renter is still in until months end. How do I determine how much to charge ? (I have a $1000 deposit)

from Springfield, Missouri

replied over 4 years ago

@Westin Hudnall Some of this is going to depend upon your state laws so it is always good to read those and know your rights as well as the tenant's rights. Missouri's Attorney General has put out a little booklet that we hand to each and every tenant at lease signing. Also, if you haven't you should start the practice of taken very detailed pre-pics of a property before move in and then also upon move out. Keep these somewhere that they will never be deleted it is one of the best ways to win court...document, document and document again.

So in MO we have to provide the tenant a walk through that is scheduled where the tenant can be there if they want to be. That is where you have to be tough. I walk through with my cell phone on a note app like Evernote and write down everything that I seen that I'm pretty sure was not pre-existing (side note: I always walk around everything twice before discussing anything with the tenant, you'll be surprised how much more you see the second time around). After this is finished I then discuss with the tenant all the issues I found. I thank them for renting with us and that my goal is for them to get as much back of their deposit. (INSERT IF NEEDED: But in walking around I think you can agree this is not what this home looked like when you moved in.) Many times they will say, "That was there when I moved in." To that I simply respond that I have detailed pictures of the whole place and if it was there then rest assured you will not be billed for that.

I do not discuss any type of amounts with them because quite honestly I don't know right then exactly how much it will be. In MO we have 30 days to send them a detailed list of repairs and the cost with those repairs. That is then when I either send them a check or let them know what they owe us.

In your case I'm assuming you don't have pictures of what it looked like before he moved in...maybe a bad assumption :) On the appliance issue, I hope you have receipts from when you installed them and that would be something you can stand on. Now whether you have to replace them or they will just need a deep cleaning that is up to you, we always try to be as fair to the tenant as possible but in this case they were new.

On the carpets, if it is not cleanable and they weren't new you will probably have to pro-rate them out if you are going to have to replace them. Again this is to your discretion but we never go below 50%. So if the carpets cost $1000 then the minimum I would charge is $500.

In terms of touching/cleaning the property you really can't. The tenant may be fine with you doing that but don't. If you do you lose the chance to do the walk through and document literally everything that is wrong with a property. We as owners want to get someone in as soon as possible but you have to legitimately get them moved out first.

Hope that helps and if something here doesn't make sense just let me know or if you have other questions. I'd be happy to send you an example of a walk through that I've done if that would help.

The key to being a good property manager is to know the laws in your state and document everything.

from Bedford, NH

replied over 4 years ago

I mostly agree with Aaron here, except about the carpets. Judges here won't give any value at all for carpets that are 4-5 years old. That is their useful life. So if these were the original 2007 carpets, tread carefully there.

from Princeton, Kansas

I take photos of the entire place - floors, ceilings, woodwork, etc., put all the pics on a CD & give a copy to the tenant at move-in. They are welcome to take their own, too, of course.

This state requires an initial walk-through, as well. The paperwork details everything that's not in tip-top shape - tenant signs it & receives a copy.

I have a list of repairs/replacements of all sorts with standard costs & labor rates for this area. (I found it originally on BP, I think!) I give a copy of this to tenants so that they can get an idea of what they will be charged for various damages at move-out. When they see that having a cleaning crew come in will cost them $200 (or whatever), it gives them a good incentive to minimize the destruction. No guarantees!

This doesn't help you much right now, but you might keep it in mind for the next time around.

Investor and Real Estate Agent from Maize, Kansas

Involved In Real Estate from Winston-Salem, North Carolina

replied over 4 years ago

@Westin Hudnall We do an eyeball assessment when the tenant gives notice so that we know what work will be required to make it marketable again. We do not give the tenants any indication of what they will be responsible for during that preliminary walk-through, we just document the work to be done. When the tenant moves out, we do the formal walk through and immediately begin rehab. Once rehab is done, we assess damages to the tenant based on our costs. They get pictures and a line-item accounting of the deductions from the security deposit. If there's a significant cost, we'll even include a copy of the vendor's receipt.

I would advise against making any repairs before the tenant moves out. I'd also advise against showing the property before it is ready to rent. My experience is that prospective tenants believe 'it is what it is' and cannot see what it will be once the rehab is over. Showing it before it's move-in ready has been just a waste of time in my experience.

Real Estate Broker from Cleveland, OH

Account Closed

replied over 4 years ago

A 70-100 dollar per hour fee for labor + costs of parts is fair I think. Check with the laws in effect in your state though. Give a details statement of the work and time that it has taken to repair the damage and include photos. The statement needs to look professional and "official". Also always wait until the tenant is out before you do any of that and send his safety deposit minus the fee along with the statement to him by certified mail with delivery confirmation to his new address. No verbal exchange is necessary and it should be avoided in my opinion because it can generate arguments and conflict. In most cases, when the tenant receives his check for what remains of his safety deposit along with a statement explaining in detail where that money went and pictures of the damage he caused, it is left at that.

Residential Real Estate Broker from Chicago Suburbs, Illinois

replied over 4 years ago

Account Closed you most likely have up to 30 days to communicate with your tenant on what damages you found and how much they cost and 45 days to return the balance of the security deposit or let them know what they owe you, but that depends on your lease and your state. Take the 30 days and get invoices for work you are hiring out and log how much work you are doing yourself. Use a reasonable figure for your time that you think would be defensible in front of a judge, and add up all the numbers. As someone said, you should probably subtract off depreciation for the carpets, appliances, etc. if you think you are going to wind up in front of the judge. Also, I have heard that some judges think cleaning is part of normal wear and tear, so be careful there.

I wouldn't try to show the unit until you get it back and fix it up, otherwise you are only going to attract another filthy tenant.

Investor and Real Estate Agent from Maize, Kansas

You make a great point about mainly attracting dirty clients showing a dirty place. However - I dont mind doing a few showings and am hoping a result will turn our differently for 2 reasons :

1 - My rent is $1400/month so mainly only higher end tenants will apply.

2 - We have decided to replace all upstairs carpet with nice laminate so hopefully we can find a potential client that can see what it will be and not what it is.

I will keep everyone updated on how it goes !

(Ive had it go both ways before; Ive had someone move in before construction was done and is one of my best tenants (makes over 100k/yr ; upgrades the property and pays 2 weeks in advance each month; Ive also had A NUMBER of potential clients never call back)

Residential Real Estate Broker from Chicago Suburbs, Illinois

I'm a clean person, the daughter of a clean freak. Although I am able to figure out how to use a room without seeing it staged and can read blueprints, I would never be able to look past filth and be told it "will be cleaned". I think other clean freak people are like minded and they can make for awesome tenants. That's just my 2cents. Obviously, it's better to get the place rented as soon as you can and the only way to do so is to show it earlier than later.

Rental Property Investor from Olympia, WA

replied over 4 years ago

Account Closed I have $45/hr in my contract but a judge in our jurisdiction will not allow the owner anything if he does the work himself. If I have receipts from a contractor they will allow that and they will allow receipts for materials.

Investor and Real Estate Agent from Maize, Kansas

They want the place. Nice couple with 2 kids and no pets. Makes 3.5 - 4 X rent on average. Don't care about us replacing any worn carpet. Deffinately not clean freaks ; would be nicer if they were but they are not (however they are very nice and friendly)

from Fredericton, New Brunswick

They want the place. Nice couple with 2 kids and no pets. Makes 3.5 - 4 X rent on average. Don't care about us replacing any worn carpet. Definitely not clean freaks ; would be nicer if they were but they are not (however they are very nice and friendly)

Would you rent to them?

Westin:

How did they their credit and reference checks come back?

We are in the process of dealing with a "very nice and friendly" couple, inherited with one of our properties a couple of year ago, who would never have come though our normal screening process.

As for damages: Here we do a move-in and move-out inspection of a property {as previously mentioned take lots of before and after pictures}. We have 7-days from the time a Tenant vacates to notify the Rentalsman whether we will be filing a claim against their security deposit - fortunately you can later file an amendment to update the claim.

Here we can charge the tenant for any repairs above normal wear and tear for the length of the tenancy (or since an item, such as a new floor, was put into service during the tenancy). However, security deposits here are not allowed to exceed one month's rent, so the amount of damages upon which you can collect is truly limited. As a result, we tend to conduct periodic (at least annually and as frequent as quarterly) inspections of our properties and correct damages as they are found - we then bill the Tenant immediately rather than wait for the end of the lease.

from Fredericton, New Brunswick

I showed them the property tonight so I haven't performed checks. What site do you use for checks?

Westin:

Most of the time if we have a claim it is for cleaning and repairing a few little things, but if you are in this business for any length of time, you are bound to get a few that do real damage to a property - sometimes willfully, but just as often out of ignorance. I cannot go into the details of our current situation, but I will state that the renovations will outweigh the amount of rent we've collected from them over the past two years.

For performance of credit checks, we use TVS (available on both sides of the border) and Rentcheck (Canada specific). You typically need to be setup and vetted by the company in advance of being able to run credit checks - they need to confirm that you have the appropriate facilities and controls in-place to assure privacy is maintained.

I do believe in the U.S.A. you have on-line services that get around this by having the candidate submit the credit request themselves and simply authorize you to view the results.

from Springfield, Missouri

replied over 4 years ago

The one that I've used for years is Tenant Verification Services or I think tenantverification.com. You can run several reports here but I just do the basic credit and then do the background through our court system online.

Don't always go with nice. I've been burned before. Also a huge thing is to require first months rent and security deposit to be paid in cash, money order or cashiers check. I had a lady write me two checks and both of them bounced...not a good day.

from Springfield, Missouri

Free eBook from BiggerPockets!

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!